Motion picture film no longer is a convenient medium by which to distribute video information. Producing copies of a film is a time consuming process which, while not prohibitively expensive or difficult, is much more expensive than modern alternatives such manufacturing optical discs. Film is also a relatively heavy medium which, at 25 pounds a canister, represents a significant shipping expense. Film's disadvantages do not end with production and distribution, display of the films requires a trained projectionist to assemble the films with trailers and to operate the projection system. Furthermore, film quickly degrades, often with more than 80% of the scratches and dirt accumulating on a film within the first two days of release.
In addition to all of the physical drawbacks involved with the use of film to distribute motion pictures, there are also significant security concerns involved with the use of film. These security drawbacks center around the economic structure of the motion picture industry. Motion pictures represent an tremendous investment of capital by the production studios. The production studios rely on a stream of income over an extended period of time to recoup this investment and return a profit. This income stream is fed by admission charges during the initial theater showings of new releases and through various other outlets for older motion pictures such as sales of video cassettes and royalties from television broadcasts.
Unlike many other industries where there are underlying assets such as factories or secret production methodologies which prevent others from competing directly with the original producers of a product, the motion picture industry releases a product that may be easily and cheaply reproduced, or reused, without the necessity of a large capital investment. These reproductions compete directly with the original copies for audiences and markets—without generating additional revenue for the production studios. In the past, these unauthorized reproductions were typically of inferior quality—a trait that limited the demand for the unauthorized reproductions. As motion picture distribution transitions from a photographic-based medium to a digital computer-based medium, however, the unauthorized copies typically will be perfect copies of the original.
Furthermore, since the distribution agreements generally call for a royalty payment based on the number of showings, simply making unauthorized showings of the original also avoids royalty charges. Unauthorized reproductions and additional showings not only deprive the motion picture studios of royalty income, they also reduce the studio's control over the release and publicity of the movie. Advertising heavily influences the motion picture viewing public. The motion picture industry carefully orchestrates the release of each picture to coordinate the distribution with the associated advertising campaign. Box office receipts control the amount of advertising a particular film receives, as well as the number of screens which will show the film. Furthermore, films almost always are released in the United States first, since it is the largest market, and released in other countries several weeks, or often months, later. Unauthorized copies generated from U.S. versions of a film sometimes are shown in foreign theaters as little as one week after the U.S. release date.
Intellectual property laws protect producers of valuable technical and creative information. Specifically, copyright laws are designed to protect the content of motion pictures from unauthorized duplication and performance, both in the United States and internationally. In spite of the protection available through intellectual property laws, motion picture producers have been vulnerable to copyright infringement both in the United States and abroad. This infringement may be perpetrated by the motion picture distributor, theater owner, or even an independent party who gains access to the film. Therefore, the motion picture industry is in need of a system of distribution that improves the security of the motion picture content.